Sensex drops 73 points ahead of RBI policy meet

 Economy
Dec 172012
 

The author has posted comments on this articlePTI | Dec 17, 2012, 05.22PM IST
MUMBAI: The BSE benchmark Sensex today closed 73 points lower on profit-selling in blue-chips, including HDFC group firms and the IT pack, amid a lower GDP growth projection for current fiscal even as some are expecting RBI to spring a surprise tomorrow.

The 30-share Sensex resumed lower at 19,290.92 and hovered in a narrow 130-point range, before ending at 19,244.42, a loss of 72.83 points or 0.38 per cent.

Similarly, the NSE 50-share Nifty also moved down by 21.70 points, or 0.37 per cent, to 5,857.90.

Brokers said trading sentiment dampened after government lowered the growth projection for the current financial year to 5.7-5.9 per cent from 7.6 per cent estimated earlier.

Moderating inflation has raised hopes of rate cut by the Reserve Bank tomorrow, but experts believe it is more likely to cut the Cash Reserve Ratio for banks than go for rate cut.

HDFC and HDFC Bank shares slipped 1.6-1.8 per cent. Most investors remained cautious and refrained from enlarging any fresh positions before the RBI mid-quarterly policy meeting tomorrow, brokers added.

However, ICICI Bank and SBI shares gained 0.6-1 per cent. “Market is likely to stay cautious in anticipation of the RBI move tomorrow. Rates are most likely to remain unchanged …yet some are expecting RBI to spring a surprise,” said Amar Ambani, Head of Research, IIFL.

Reliance Industries and ITC fell 0.6-0.8 per cent on profit-booking activity. Bharti Airtel, which fell 3.7 per cent, was the worst performer in Sensex today.

Weak sentiment from Europe also hit domestic markets on concerns over the so-called US fiscal cliff.

IT stocks, including TCS and Wipro fell in 1.4-2.8 per cent. Infosys also dropped 0.56 per cent on growth worries, dealers said.

Fed’s stimulus plan: European shares, dollar soften

 Economy
Dec 132012
 

LONDON: World shares were largely flat and commodities slipped on Thursday as investors looked past the Federal Reserve’s latest measures to stimulate the US economy to the country’s approaching fiscal crisis.

Stock index futures signalled that Wall Street would take a similar view when trading resumes, although data due on producer prices, retail sales and claims for unemployment benefits could have a big influence. .N

The Fed said on Wednesday it would begin buying $45 billion of Treasuries a month from January, on top of the $40 billion a month in mortgage-backed bonds it started purchasing in September to keep the U.S. recovery on track.

Such a big stimulus would normally have been greeted by a sharp rally in riskier asset markets, but many had already priced in the policy decision and other were more worried about the impact on growth of upcoming fiscal policy changes.

The MSCI world equity index .MIWD00000PUS, which had seen seven straight days of gains, was unchanged at 337.80 points,

“What the Fed announced yesterday was more or less expected, so I think we’ve had people selling the news,” Ioan Smith, strategist at Knight Capital, said.

The Fed did surprise many in the markets with its decision to hold interest rates near zero until unemployment falls to at least 6.5 percent and as long as inflation remained low.

Fed chairman Ben Bernanke warned that monetary policy could not offset the damage to growth from automatic spending cuts and tax rises due if talks in Washington on narrowing the budget deficit fail, adding to the cautious reaction to the announcement.

Analysts said investors were right to be cautious. “If the talks fail and we get 3 or 4 percent of GDP of fiscal tightening, that’s going to be a massive, massive drag on economic growth,” said Alan Clarke, economist at Scotia Capital.

“Even if we get a compromise and it’s just 1 percent of GDP of fiscal tightening … that would make it very hard for growth to be anywhere near this sort of 2 percent that the consensus is assuming over the coming year.”

These concerns caused a marked drop in European share markets, where the FTSEurofirst 300 index .FTEU3 fell 0.4 percent to 1,135.46 points, ending a three-week-long rally that has sent prices to 18-month highs. .EU

London’s FTSE 100 .FTSE, Paris’s CAC-40 .FCHI and Frankfurt’s DAX .GDAXI were all 0.1 to 0.4 percent lower.

Dollar choppy

In the foreign exchange markets, the dollar initially slipped to a one-week low of 79.71 against a basket of other major currencies .DXY after the Fed decision, but recovered as investors closed positions before the year-end.

“The Fed announcement has had a fairly limited impact on most of the majors,” said Adam Cole, global head of FX strategy at RBC Capital Markets.

The dollar index .DXY settled to be unchanged at 79.86, while against the euro the greenback was little changed at

$1.3080.

Sentiment toward the euro was helped by a deal clinched early on Thursday to give the European Central Bank new powers to supervise euro zone banks, the first step in a new phase of closer integration to help underpin the single currency.

The euro found some support after former Italian leader Silvio Berlusconi, who had abruptly withdrawn support for Prime Minister Mario Monti’s government last week, offered to stand back and suggested Monti could become the candidate of a centre-right coalition in elections expected in February.

Yen pressure

The Japanese yen came under renewed pressure as markets took the view that the Fed’s move made it more likely that the Bank of Japan would further ease monetary policy next week to support its weak economy.

The dollar rose to near its 2012 high of 84.187 yen to trade around 83.47 yen.

Japan holds an election on Sunday, with opinion polls showing conservative former Prime Minister Shinzo Abe’s opposition Liberal Democratic Party, which favours more stimulus measures, is heading for a resounding victory.

Oil prices retreated on widespread concerns about the growth outlook, with U.S. crude futures down 34 cents at $86.44 a barrel and Brent falling 33 cents to $109.14.

“People are worried about the economy, the fiscal cliff in the U.S., and the European economy still remains a tricky one,” said Richard Langkemper, analyst at Argos North Sea Group in Rotterdam.

Gold tumbled by just under 1 percent on stop-loss selling after touching its highest in nearly two weeks on Wednesday to trade around $1,693.80 an ounce.